TD Power Systems' (NSE:TDPOWERSYS) Shareholders Will Receive A Bigger Dividend Than Last Year

The board of TD Power Systems Limited (NSE:TDPOWERSYS) has announced that it will be paying its dividend of ₹0.60 on the 12th of September, an increased payment from last year's comparable dividend. Based on this payment, the dividend yield for the company will be 0.3%, which is fairly typical for the industry.

View our latest analysis for TD Power Systems

TD Power Systems' Earnings Easily Cover The Distributions

While it is always good to see a solid dividend yield, we should also consider whether the payment is feasible. However, TD Power Systems' earnings easily cover the dividend. This means that most of its earnings are being retained to grow the business.

Looking forward, earnings per share could rise by 107.7% over the next year if the trend from the last few years continues. Assuming the dividend continues along recent trends, we think the payout ratio could be 7.7% by next year, which is in a pretty sustainable range.

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. Since 2014, the annual payment back then was ₹0.46, compared to the most recent full-year payment of ₹1.20. This works out to be a compound annual growth rate (CAGR) of approximately 10% a year over that time. Dividends have grown rapidly over this time, but with cuts in the past we are not certain that this stock will be a reliable source of income in the future.

The Dividend Looks Likely To Grow

Growing earnings per share could be a mitigating factor when considering the past fluctuations in the dividend. TD Power Systems has seen EPS rising for the last five years, at 108% per annum. Rapid earnings growth and a low payout ratio suggest this company has been effectively reinvesting in its business. Should that continue, this company could have a bright future.

TD Power Systems Looks Like A Great Dividend Stock

Overall, we think this could be an attractive income stock, and it is only getting better by paying a higher dividend this year. The company is easily earning enough to cover its dividend payments and it is great to see that these earnings are being translated into cash flow. Taking this all into consideration, this looks like it could be a good dividend opportunity.

It's important to note that companies having a consistent dividend policy will generate greater investor confidence than those having an erratic one. Meanwhile, despite the importance of dividend payments, they are not the only factors our readers should know when assessing a company. For instance, we've picked out 3 warning signs for TD Power Systems that investors should take into consideration. Is TD Power Systems not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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